IMF to revise forecasts as global economy booms

Washington: The International Monetary Fund is going to revise its economic growth forecasts amid a “global boom,” the IMF chief economist, Simon Johnson, said on 20 July, suggesting a hike.

“We were criticised for being optimistic at the time of our spring forecast,” Johnson said at a news briefing, referring to an IMF forecast of world growth at 4.9% this year and in 2008.

“Let me just say we are quite pleased that we were optimistic,” he told reporters, without giving any precise figures. The IMF will release an update of its World Economic Outlook on Wednesday.

“The global picture, broadly speaking, is the US continuing to show weakness, as we expected, but the rest of the world economy has done very well,” he said citing Germany and the fast-growing emerging economies of China and India.

“This is a global boom,” he said.

On the inflation front, he said, a rising demand for food, observed since the IMF and World Bank’s annual meeting in April, “puts pressure on food prices at the same time that you have an ethanol shock coming in the United States.”

Food prices in the US have shot higher as farmers plant more corn to make ethanol, a lucrative, alternative energy fuel, reducing the acreage for crops for human consumption.

However, the IMF is “puzzled” by the lack of inflation in Japan, the world’s second-biggest economy, he said.